Despite what Apple Hospitality REIT CEO Justin Knight called a “challenging” transactions market, the hospitality-focused real estate investment trust is in buy-and-sell mode, though at a somewhat smaller scale.
On the sale side, the company sold the Homewood Suites by Hilton Chattanooga-Hamilton Place in Chattanooga, Tennessee, for $8 million to Pulse Hotel Group and MD Hospitality in February and the SpringHill Suites Indianapolis Fishers for $13 million in March to Bradford Allen Realty Services. This summer, Knight said Apple REIT will complete the sale of the Marriott Houston Energy Corridor for $16 million.
“Where we’ve been effective from a disposition standpoint has been around smaller assets where we’re generally selling to local owner-operators at lower per-key and lower all-in purchase prices,” Knight said.
He said on the company's first-quarter earnings call with analysts that the three hotels "will trade at a sub-7% cap rate" and proceeds will be used to fund share repurchases and reduce debt.
On the buy side, the REIT has two hotels under contract — the 126-room Homewood Suites by Hilton Tampa Brandon for $19 million from Trimont Real Estate Advisors and the under-construction Motto by Hilton Nashville Downtown for $98 million. That deal has been in the works for more than a year.
Knight called the Homewood Suites acquisition a "a very unique transaction," offered up as a hotel next door to one the REIT currently owns, "where the hotel has been taken back by a lender," allowing Apple to negotiate a favorable price and realize co-location synergies.
"I think there will be fewer transactions like that available" in the current environment, he said.
Quarterly performance
This activity comes amid a first quarter of generally lower performance for the company’s U.S. hotels, compared to the same quarter last year.
Same-store hotel occupancy declined 1.5% to 71% in the first quarter of 2025 compared to the same time last year. Average daily rate rose 1% to $157, resulting in a 0.5% decline in revenue per available room to $111 in the quarter.
Bottom-line performance also dipped a bit, Knight said, "driven primarily by higher fixed costs and lower-than-expected top-line growth." Adjusted earnings before interest, taxes, debt and appreciation for real estate was $95 million, down 5.4% from the first quarter of 2024.
Apple's total debt to total capitalization, net of cash and cash equivalents, was approximately 33%.
Apple Hospitality REIT owned 219 hotels with 29,558 guestrooms as of the end of the first quarter. Those hotels are in 37 states and the District of Columbia.
Liz Perkins, Apple REIT's senior vice president and chief financial officer, attributed the first-quarter dips to factors including winter weather in Sun Belt markets, soft demand in Southern California following the wildfire recovery and the pullback in government travel in March. Government demand represents between 5% to 6% of the REIT's overall business mix, Perkins said, and "has stabilized over the past months closer to the lower end of that range."
Knight reiterated to analysts that moving forward, the company "is really focused on group and property-direct business, and mixing shift away from government, which we had leaned more into than we had historically."
Apple REIT's hotels did see some of what Knight called "onetime group cancellations" from government business, but overall, group business on the books is "in a strong position."
As of press time, Apple REIT's stock was trading at $11.49 a share, down 24.1% year to date. The NYSE Composite Index was up 1.1% for the same period.